New businesses-making new products like automobiles, radios and refrigerators-borrowed to support non-stop expansion in output. The runaway speculation that triggered the 1929 crash and the Great Depression that followed couldn’t have taken place without the banks, which fueled the 1920s credit boom. Here are four ways banks "did it": Banks Extended Too Much Credit “Regarding the Great Depression…we did it,” Bernanke said in a 2002 speech, referring primarily to the Fed’s role. In fact, in the eyes of such luminaries as Ben Bernanke, an economic historian and former head of the Federal Reserve, the crisis was all about the banks-from the central bank (the Fed itself), down to the smallest savings institutions. The familiar narrative of the Great Depression places banks among the institutions that suffered fallout from the crisis. financial institutions collapsed, wiping out the lifetime savings of millions of Americans. Banks failed-between a third and half of all U.S. But just why-and how-could those gamblers dominate the stock market? And why did a crisis in the markets become a systemic decade-long economic catastrophe during which unemployment skyrocketed to 25 percent and the cost of goods and services plunged? By 1933, dozen eggs cost only 13 cents, down from 50 cents in 1929. Sure, without all that uncontrolled and irrational market speculation, the 1930s might be recalled simply as a period when the economy and prosperity stalled.
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